Which type of valuation is used for Coverage A and B losses in homeowners insurance?

The correct answer, Replacement Cost (RC), is the type of valuation most commonly used for Coverage A and B losses in homeowners insurance. This coverage pertains to the structure of the home and any attached structures, such as garages or decks.

Replacement Cost is defined as the amount of money necessary to replace or repair damaged property with materials of similar kind and quality, without deducting for depreciation. This means that when a claim is made under Coverage A (the dwelling) or Coverage B (other structures), the insurance company will pay for the cost to replace or repair the home or structure based on its current construction and materials, ensuring that homeowners can restore their property to its original condition after a loss.

This method is especially beneficial for homeowners as it provides them with the financial means to rebuild their home to its former condition without facing penalties for wear and tear on the property over time. Understanding that Replacement Cost covers the full cost of replacement helps homeowners appreciate the importance of this type of valuation in their insurance coverage and makes it clear why it is preferred for these specific coverages.